November 19, 2013, 6:52PM

11/19/2013

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Officials with Sonoma County's startup public power agency on Tuesday signed a primary energy contract with Constellation, touting the deal with the large national power producer and retailer as one that would allow them to beat customer rates proposed for 2014 by PG&amp;E, the region's dominant utility.

The three-year contract with the subsidiary of Chicago energy giant Exelon Corp. is likely to be one of the biggest short-term business deals ever struck by a locally based government entity.

The contract, which is designed to provide the bulk of the public venture's initial energy supply, is worth under $70million just for the first wave of 20,000 largely commercial customers. By 2017, when up to 120,000 mostly residential accounts are on board, total wholesale energy expenditures for the power agency, including the main contract and secondary deals, are projected at $115million annually.

Sonoma County Supervisor Susan Gorin, the agency's chairwoman, said the contract was a linchpin in the venture's efforts to be competitive and provide a greater share of electricity derived from renewable and carbon-free sources.

"It just confirms that the promises that we made to the community were not made in haste," Gorin said of the deal. "It really means that Sonoma Clean Power is going to be successful in moving forward."

But agency officials would not disclose the energy price secured in the Constellation contract, saying only that the wholesale price fell below the cap approved by board members in advance of final negotiations. That cap reflects an average maximum retail rate that would, with PG&amp;E surcharges, equal the utility's proposed 2014 generation rate of 9.72 cents per kilowatt hour.

Geof Syphers, interim CEO of Sonoma Clean Power, said he was withholding the price figure partly because the agency remains in negotiations for a secondary supply contract with the operator of The Geysers geothermal field on the Sonoma-Lake county border.

"Keeping our cost information confidential is important to those negotiations," Syphers said. He also said withholding such information is standard practice at other public utilities he consulted, including the Marin County program that three years ago became the first community choice aggregation venture in the state.

Sonoma Clean Power, including the county and five cities so far, is seeking to become the second active program in California. The step toward securing a power supply, after nearly three years of planning and development, has long been seen as its biggest business decision. It moves the startup beyond the point of no return and into a countdown that will include rate setting, notices to customers and a series of other actions in the coming months before service begins in May.

Agency officials said they were confident the deal with Constellation would provide a solid foundation for launch.

"This is a very complex world we've entered into," said Sonoma County Supervisor Shirlee Zane, an agency board member. "But we've done it with our eyes open, and we've done our homework, and that's why we're where we are today."

Constellation was one of three large energy companies competing for the deal. The other two final candidates were NRG Energy, based in Houston and New Jersey, and Direct Energy, with a U.S. base in Houston.

The wholesale energy price in their bids was also withheld by the agency Tuesday.

Constellation supplies electricity in California, Oregon, Texas and throughout the northeastern United States and sells natural gas across the country. It sells electricity through aggregation programs to a dozen municipalities in Illinois, Ohio and Massachusetts, according to its website.

Its parent company, Exelon, is a leading nuclear power operator in the country. Exelon announced its purchase of the formerly named Constellation Energy, a Baltimore-based power producer and distributor, in 2011 and merged with the company in early 2012.

Exelon reported $23.5 billion in operating revenue last year and $2.3 billion in net income. PG&amp;E, by comparison, reported $15 billion in revenue in 2012 and $1.9 billion in net earnings.

The deal with Constellation is designed to provide up to 85 percent of the electricity for Sonoma Clean Power in the first year.

Under the terms of the deal, no electricity is to come from nuclear or coal-fired power plants. Seventy percent of the electricity will be carbon-free — from sources not tied to fossil fuels. Overall, 33 percent of the agency's supply will be from a combination of renewable sources, including wind, solar and geothermal projects, and from energy credits.

The carbon-free electricity that is not considered renewable will come from large hydroelectric projects. The remainder of the overall supply is likely to come from natural gas, Syphers said.

Last week, the public agency announced that it was negotiating a 10-year contract with a subsidiary of Calpine Corp., the operator of The Geysers geothermal field, that will provide for 15percent of the agency's overall supply as it begins rolling out. The agreement, which could be approved by the Sonoma Clean Power board Thursday, will generate a little under half of the agency's initial renewable energy portfolio.

Officials with Sonoma County's startup public power agency on Tuesday signed a primary energy contract with Constellation, touting the deal with the large national power producer and retailer as one that would allow them to beat customer rates proposed for 2014 by PG&amp;E, the region's dominant utility.

The three-year contract with the subsidiary of Chicago energy giant Exelon Corp. is likely to be one of the biggest short-term business deals ever struck by a locally based government entity.

The contract, which is designed to provide the bulk of the public venture's initial energy supply, is worth under $70million just for the first wave of 20,000 largely commercial customers. By 2017, when up to 120,000 mostly residential accounts are on board, total wholesale energy expenditures for the power agency, including the main contract and secondary deals, are projected at $115million annually.

Sonoma County Supervisor Susan Gorin, the agency's chairwoman, said the contract was a linchpin in the venture's efforts to be competitive and provide a greater share of electricity derived from renewable and carbon-free sources.

"It just confirms that the promises that we made to the community were not made in haste," Gorin said of the deal. "It really means that Sonoma Clean Power is going to be successful in moving forward."

But agency officials would not disclose the energy price secured in the Constellation contract, saying only that the wholesale price fell below the cap approved by board members in advance of final negotiations. That cap reflects an average maximum retail rate that would, with PG&amp;E surcharges, equal the utility's proposed 2014 generation rate of 9.72 cents per kilowatt hour.

Geof Syphers, interim CEO of Sonoma Clean Power, said he was withholding the price figure partly because the agency remains in negotiations for a secondary supply contract with the operator of The Geysers geothermal field on the Sonoma-Lake county border.

"Keeping our cost information confidential is important to those negotiations," Syphers said. He also said withholding such information is standard practice at other public utilities he consulted, including the Marin County program that three years ago became the first community choice aggregation venture in the state.

Sonoma Clean Power, including the county and five cities so far, is seeking to become the second active program in California. The step toward securing a power supply, after nearly three years of planning and development, has long been seen as its biggest business decision. It moves the startup beyond the point of no return and into a countdown that will include rate setting, notices to customers and a series of other actions in the coming months before service begins in May.

Agency officials said they were confident the deal with Constellation would provide a solid foundation for launch.

"This is a very complex world we've entered into," said Sonoma County Supervisor Shirlee Zane, an agency board member. "But we've done it with our eyes open, and we've done our homework, and that's why we're where we are today."

Constellation was one of three large energy companies competing for the deal. The other two final candidates were NRG Energy, based in Houston and New Jersey, and Direct Energy, with a U.S. base in Houston.

The wholesale energy price in their bids was also withheld by the agency Tuesday.

Constellation supplies electricity in California, Oregon, Texas and throughout the northeastern United States and sells natural gas across the country. It sells electricity through aggregation programs to a dozen municipalities in Illinois, Ohio and Massachusetts, according to its website.

Its parent company, Exelon, is a leading nuclear power operator in the country. Exelon announced its purchase of the formerly named Constellation Energy, a Baltimore-based power producer and distributor, in 2011 and merged with the company in early 2012.

Exelon reported $23.5 billion in operating revenue last year and $2.3 billion in net income. PG&amp;E, by comparison, reported $15 billion in revenue in 2012 and $1.9 billion in net earnings.

The deal with Constellation is designed to provide up to 85 percent of the electricity for Sonoma Clean Power in the first year.

Under the terms of the deal, no electricity is to come from nuclear or coal-fired power plants. Seventy percent of the electricity will be carbon-free — from sources not tied to fossil fuels. Overall, 33 percent of the agency's supply will be from a combination of renewable sources, including wind, solar and geothermal projects, and from energy credits.

The carbon-free electricity that is not considered renewable will come from large hydroelectric projects. The remainder of the overall supply is likely to come from natural gas, Syphers said.

Last week, the public agency announced that it was negotiating a 10-year contract with a subsidiary of Calpine Corp., the operator of The Geysers geothermal field, that will provide for 15percent of the agency's overall supply as it begins rolling out. The agreement, which could be approved by the Sonoma Clean Power board Thursday, will generate a little under half of the agency's initial renewable energy portfolio.

Officials with Constellation could not be reached for comment Tuesday.